Group_Ratio_Analysis_Solutions - Ratio Analysis Ratios Home...

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Ratio Analysis
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Ratios Home Depot Lowe's Advantage Gross Margin Percentage 32.79% 34.52% Due to the obvious differences in the size of the two companies simply knowing net income is not enough to understand each companies overall performance. The gross margin provides a more accurate way of measuring profitability. By expressing net income as a percentage of the sales revenue of each company we found that both Home Depot and Lowe's preformed equally well with gross margins of 32.79% and 34.52% respectively. Advantage = Push Earnings Per Share $2.80 $2.01 We look to gain returns from our investment in the form of dividends or increases in the price of the companies stock. A companies earnings greatly influence these two forms of returns on investment which is why we turn to the earnings per share ratio. The greater our earnings, means more potential to realize such returns. Home Depot come out far ahead of Lowe's with an EPS of $2.80. This price is almost a full dollar more than Lowe's EPS of $1.99. Advantage = Home Depot Price-Earnings Ratio 9.83% $13.85 This ratio measures the difference between the earnings per share of a stock and its current market price. A high price to earnings ratio tells us the company is looking to increase earnings and growth in the future, whereas a low ratio means the companies opportunities for growth are
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This homework help was uploaded on 02/24/2009 for the course AEM 323 taught by Professor As during the Spring '09 term at Cornell.

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Group_Ratio_Analysis_Solutions - Ratio Analysis Ratios Home...

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